The Kisan Vikas Patra currently offers an interest rate of 7.70% per annum, compounded annually, according to the latest rates effective from December 12, 2019. At this rate, an investment doubles in 113 months, or 9 years and 7 months. For example, a ₹5 lakh investment will grow to ₹10 lakh at maturity, while a ₹10 lakh investment will become ₹20 lakh. The scheme does not provide regular interest payments - investors receive returns only on maturity along with the principal amount.
There is no maximum investment limit in KVP, but investors can open accounts with a minimum deposit of ₹1,000. After the initial deposit, investments can be made in multiples of ₹100. Adults can open individual accounts or accounts on behalf of minors, while children aged 10 years and above can open accounts in their own names. Joint accounts are permitted for up to three adults, and the scheme is available through both post offices and authorized banks. However, business entities such as companies, institutions, NRIs, and HUF are not eligible to invest in KVP.
While KVP is designed for long-term investment, premature withdrawal is permitted after two years and six months from the date of investment. The amount paid on early closure depends on how long the investment has remained in the scheme. Premature closure may be allowed after two and a half years with specific payout amounts ranging from ₹1,173 to ₹1,778 depending on the duration. The scheme also allows encashment in any block of six months after the initial lock-in period, with pre-determined maturity values. Investors can also encash certificates in case of death, court orders, or pledge forfeiture.
Interest on KVP is taxable on accrual basis and will be taxed as Income from Other Sources. No deduction under Section 80C is allowed on this investment, and TDS is not deductible on KVP interest. The scheme is particularly suitable for investors who do not require regular income and are willing to keep money invested for approximately a decade. However, there is no tax concession available on KVP investments, making it unsuitable for those in higher tax brackets. The scheme is also suitable for those seeking tax-free returns and guaranteed doubling of their investment, but investors should consider that the scheme is not suitable for emergency funds due to the 9-year lock-in period and limited liquidity options.
The current KVP scheme was reintroduced on December 12, 2019 with modifications, following its earlier discontinuation in November 30, 2011 due to misuse concerns. The scheme was first launched in 1988 and was reintroduced in September 23, 2014 with new rules. KVP is now available in denominations of ₹1,000 with no upper ceiling on investment, and can be purchased through post offices and authorized banks. The scheme offers unique liquidity features where investors can encash certificates after the lock-in period, and certificates can be transferred from one post office to another anywhere in India.
